International Investor buyers have set their sights on the U.K, especially London, post the BREXIT vote, which may explain why some of these investors are missing in the New York real estate market right now. We recently conducted a (very un-scientific) survey of international investor buyers: the depressed sterling currency combined with political fears have made buying in London and the UK in general rather attractive for those with foreign currency.
A three million pound property cost around $4,62 million a year ago. Today that same property would cost $3,795 million, a significant discount (almost 18%) purely from a currency exchange perspective. Add in a market-wide valuation drop of 5-15% and its easy to explain why many investors have their sights focused on the UK.
Naturally, there are risks: what if the British currency dips further? What if the realities of BREXIT implementation further depress real estate valuations? Recent press about slowed transaction volume in New York could be explained by some investors turning their sites elsewhere as they see bargains in the UK, although I suspect the smartest investors would rather bet on the dollar and the stability of the US markets. For now.
Several of the investor buyers surveyed stated clearly that they were concerned about the outcome of the 2016 Presidential election in the USA, which is not un-traditional for election years, although this year it is compounded more by an extremely aggressive divide in the country with the potential of Brexit-style isolationist policies.
Speculator investor-buyers are for the most part out of the New York real estate market: the unrealistic expectations of annual double-digit price escalation are over for the time being as the markets have settled into the ‘NEW NORMAL’. There are many value-seeking buyers in New York right now have the advantage of time to make decisions. They are snapping up some outstanding, correctly priced properties, picking out ‘the best-of’, the kind that sell at a huge premium when escalation mode returns.